Bitcoin Mining is Booming in Iceland, But at What Cost?

Bitcoin mining is booming in Iceland. Problem is, they don’t have enough energy to go around, and not everyone in the government is on board.

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Mining bitcoin – the process of confirming transactions across the blockchain – is an incredibly energy-consuming process. To meet the computational demands needed to actually turn a profit from cryptocurrency payouts, miners require top-tier hardware and cheap energy.

Iceland provides the latter, but there isn’t enough for everyone.

Iceland is one of the best places on Earth to mine Bitcoin, thanks in part to its cold climate, which naturally helps keep hardware from overheating and cuts down on costs associated with air condition and cooling systems. Additionally, energy prices are low and the country’s internet is powered by a strong fiber-optic infrastructure, making it a promised land for miners.

Nevertheless, Bitcoin mining in Iceland still consumes immense amounts of energy. Johann Snorri Sigurbergsson from Icelandic energy company HS Orka told BBC that there simply isn’t enough energy to power newly-proposed data centers. According to Sigurbergsson’s estimations, Bitcoin mining in the country uses more power than all of Iceland’s homes, combined.

Four months ago, I could not have predicted this trend — but then bitcoin skyrocketed and we got a lot more emails. Just today, I came from a meeting with a mining company seeking to buy 18 megawatts.

Not only is this an issue for energy companies, but also one for some Icelandic government officials, who are catching on to the fact that Iceland’s energy-eating miners aren’t paying taxes. Smari McCarthy, a member of Iceland’s Pirate Party, told the Associated Press:

Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government. These companies are not doing that, and we might want to ask ourselves whether they should.

We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation. That can’t be good.

Bitcoin mining company Genesis Minining’s manager Helmut Rauth, however, takes an unsurprisingly different viewpoint, claiming that, “What we are doing here is like gold mining. We are mining on a large scale and getting the gold out to the people.”

Whether or not Iceland’s energy companies will be able to meet the rising demand for energy from Bitcoin miners remains to be seen.

What do you think about the environmental costs of large-scale Bitcoin mining? Do you think miners should pay taxes in Iceland? Let us know in the comments below!